b'38 Mercia Asset Management PLC Annual Report & Accounts 2022Chief Financial Officers review continuedA reconciliation of the results reported on an APM basis to International Financial Reporting Standards (IFRS) is as follows:Year ended 31 March 2022PerformanceIFRS as APM basis 1 fees Depreciation reported000 000 000 000Revenue 20,576 2,60723,183Administrative expenses (16,618) (1,015) (224) (17,857)Depreciation (224)224 Year ended 31 March 2021PerformanceIFRS asAPM basis1 fees Depreciation reported000 000 000 000Revenue 19,186 4,22423,410Administrative expenses (15,897) (445) (212) (16,554)Depreciation (212)212 The Group acknowledges the recentthe year ended 31 March 2021, the like- of Faradion. Non-convertible loans by recommendations of the Financialfor-like increase was c.14%. Mercia to direct investee companies may Reporting Council, that APMs shouldhave redemption premiums attached not be given greater prominence overAs Mercias assets under managementthereto. During the year, one such its financial results reported under IFRS.continue to grow and the financialredemption premium, also in connection In future years therefore, the Group willbenefits of operational leverage continuewith the sale of Faradion, was received highlight and reconcile its results underto be realised, the Group will ensure thatin cash and this is also accounted for as IFRS to its APMs, rather than reconcilean appropriate balance is kept betweentaxable finance income.its APMs to its results under IFRS. As anits investment expertise and its support example, only exceptional performancefunctions capacity and capability, toTotal gross finance income of 4,452,000 fees receivable, together with anymaintain its control environment and(2021: 68,000) therefore arose primarily associated staff bonus accrual, will becorporate governance culture. from both crystallised loan interest and reported separately within the overallredemption premiums. Finance costs calculation of adjusted operating profit. Net finance income of 15,000 (2021: 20,000) comprised Investment rounds into the Groupsinterest payable on office leases and the Revenuedirect investment portfolio are generallyGroups new staff electric car scheme.Revenue 1increased 7.2% to 20,576,000either equity and/or convertible/non-(2021: 19,186,000) and comprisedconvertible loans. As the portfolioPerformance fees and fund management related fees, initialcontinues to mature and either fundingattributable variable management fees from investmentrounds with third-party investors occurcompensationrounds, investment director monitoringor successful exits are achieved, thePerformance fees can become fees and sundry business servicesinterest entitlement attached to thesereceivable under certain of the income. Excluding the impact of VCTloans is typically converted into eitherGroups fund management mandates, share offer fees received in the yearadditional equity or, on a full exit,when predetermined performance ended 31 March 2021, the like-for-likepaid to Mercia in cash. At the point ofhurdles are exceeded. During the year, increase was c.15%. conversion/payment the interest isperformance fees totalling 2,607,000 recognised as taxable finance income.(2021: 4,224,000) were received, Administrative expenses Until the loans are converted/repaidpredominantly from Northern Venture Administrative expenses 1 , excludingand the interest entitlement crystallises,Trust PLC, based upon the growth in depreciation, increased 4.5% tothere is never any certainty that theits net asset value per share above a 16,618,000 (2021: 15,897,000) andinterest entitlement will be crystallisedhurdle for the year ended 30 September comprised predominantly staff-related,into additional equity/paid. During2021. Attributable VCT investment team office, marketing and professionalthe year, a number of convertible loanbonuses (including employers National adviser costs. Removing the impact ofinterest entitlements crystallised, theInsurance) totalling 1,015,000 were VCT share offer-related costs incurred inlargest being in connection with the salepaid (2021: 445,000).'